1968 (10) TMI 11 - HC - Income Tax

Commencement of Business - Whether interest income and the share transfers were rightly assessed under other sources - Whether the assessee was entitled to the deduction of the Office and Establishment expenses - question No. 1 is answered in the affirmative and question No. 2 in the negative and both against the assessee

Summary

Issues:
1. Assessment of interest income and share transfers under other sources.
2. Entitlement to deduction of expenses amounting to Rs. 34,139.

Analysis:
The case involved a reference made by the Madras Bench of the Income-tax Appellate Tribunal regarding the assessment year 1962-63. The primary issue was whether the interest income and share transfers should be assessed under other sources. The assessee, a public limited company, claimed that the interest earned on the deposits of share capital in banks constituted income from business. However, the Income-tax Officer, the Appellate Assistant Commissioner, and the Income-tax Appellate Tribunal rejected this claim, holding that the amounts were income from other sources. The court agreed with this assessment, emphasizing that the company had not engaged in a business of investing and dealing with funds during the relevant accounting year. The court cited a decision of the Madhya Pradesh High Court to support its conclusion.

Regarding the second issue of the deduction of expenses amounting to Rs. 34,139, the assessee contended that the expenditure fell under section 57 of the Income-tax Act. However, the court rejected this argument, stating that the expenses were not incurred for the purpose of making or earning the interest income. The court referred to a decision of the Calcutta High Court to support its position. Additionally, the claim for deduction under section 37 of the Act was dismissed as the business had not been established during the accounting year.

In conclusion, the court answered the first question in the affirmative and the second question in the negative, both against the assessee. Each party was directed to bear its own costs, and a copy of the judgment was to be forwarded to the Income-tax Appellate Tribunal as required by the relevant section of the Act.